"Gen Zers have become accustomed to the intuitive, instant, mobile interactions they have with their favorite brands. They also expect this great customer experience from their bank, whether its in-person, through contact centers, or when transacting online. But a recent survey we conducted shows that banks are not digitally satisfying this key customer group," Zviki Ben-Ishay, CEO of Lightico, said. He pointed out the number one frustration among Gen Z is when a financial institution directs them to a physical branch. "Over half of Gen Z say they would switch banks due to a poor customer experience."

Ben-Ishay said while financial institutions are increasingly investing in tools to digitize their banking, it is clear that there are still major gaps in their customer-facing processes. "They are still far from providing the seamless and mobile experiences that customers demand."

The report noted banks probably know they already have a number of Generation Z clients. That is for good reason. The Lightico survey found that this group tends to start off banking with a familiar brand. So, the fact that a family member is already a client at a particular bank is key factor in their initial bank choice.

These patrons arrive at financial institutions mainly as a result of their parents' preferred choice. The report found, as they get deeper into the banking experience, they often find it is not what they hoped. As a result, they are ready to leave to find better customer interactions elsewhere.

"In other words, Generation Z is disproportionately reliant on what's easy and recognizable through family connections. When it comes to their initial banking relationships, Generation Zers do not do much shopping around. That comes later," Howard Schulman, author of the report and Lightico marketing strategist and operations director, suggested location and familiarity only go so far. "As it turns out, Gen Zers often do not have a good first impression of banks. Among their initial disappointments are that these institutions are not digital enough. This demographic has never known life without technology."

About 45% of teenagers — only a few years away from becoming full-fledged adults and banking clients — are online several times a day. "Mobile and online experiences are not just second nature — they are what is expected from any interaction with a brand," the report confirmed.

Lightico found the top frustrations among this group in applying for a credit card, new account or loan are having to physically go to a branch and the amount of paperwork. cited by 75% and 73% of Gen Z respondents, respectively. These were much bigger frustrations than a slow online app, cited by only 43% of respondents.

The report noted despite good reasons financial institutions want to see a client in person, such as rules and regulations, and identity verification requirements, these offline requirements are particularly burdensome for Generation Z. "It does not contribute to making the banking experience enjoyable or convenient."

The survey also found that although it may seem counterintuitive for Gen Z, a positive service experience is especially important. They may want to rely on apps and online platforms, but they also expect excellent customer service. "Generation Z seems to have no qualms about leaving their original bank. That is true even if there is a family legacy with that brand."

The Lightico survey found that more than half of Generation Z respondents (51%) considered switching banks as a result of a bad service experience; and 82% of Generation Z respondents said they would switch financial institutions if the alternative offered them superior digital experiences.

While financial institutions realize that mobile is a key channel to communicate with customers, their apps still do not reflect today's impatient, distracted customers, Ben-Ishay said. "Today's customers expect interactions to be easy and delightful – like they are used to with Netflix or Amazon. But even with banking apps, customers are regularly redirected and required to print and sign forms and are redirected to a physical branch to complete compliance processes such as verifying their identity or providing documents." The CEO added, "For younger generations, 82% of survey respondents agreed that the biggest factor that would make them switch banks is a better mobile and digital experience. Even older customers, they demand easy digital interactions too."

Ben-Ishay explained, it is no longer an option for financial institution. "they must have simple, digital channels to reach their customers. Thankfully, there are technologies that can make banks create these effortless, complete interactions simply and securely."